AMP Limitedâ€™s full-year results and what investors need to know

Last week AMP Limited (ASX: AMP) released its full-year results for the year ending 31 December 2013. The market cheered the results sending the stock price up from the $4.50 level pre-announcement to the $5 level post announcement.

Like some of its financial services sector peers, including Insurance Australia Group (ASX: IAG) and Suncorp Group Ltd (ASX: SUN), AMP's results were a mix of good and bad. Here are some of the key points investors need to be aware of.

Underlying profit down but most divisions performing well

Underlying profit fell 11% from $950 million to $849 million, however AMP Bank managed to deliver a record earnings result of $83 million, Australian Wealth Management boosted earnings to $330 million and New Zealand contributed earnings of $97 million, up 14%. Less impressively, considering the strong equity markets in 2013, AMP Capital and AMP Mature recorded flat results.

Australian Wealth Protection was the laggard

The insurance division reported a drop in earnings from $190 million in 2012 to $64 million in 2013. According to management, the life insurance sector remains challenging with insurance claims and policy lapses remaining at higher levels than the long-term average. The key positive is that management expects that over the medium term claims and lapse experience will improve.

Significant cost saving to boost the bottom line

AMP remains on target to deliver $200 million in pre-tax recurring, run rate cost savings by the end of 2016. While this will require a $320 million investment over the next three years, the boost this should provide to the bottom line certainly makes it worthwhile.

Foolish takeaway

AMP is a market leader in wealth protection and wealth management services in Australia. Despite the recent bounce in its share price it is arguably still the best long-term opportunity amongst the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) for gaining exposure to the domestic (and Chinese) financial services sector at a reasonable price.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.